The Real Costs of Patent Trolls

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

Comments

Interesting, did they account for the lost revenue and profits of the companies that created the inventions, when they were stolen?

This study's methodology can be compared to the losses that resulted to a criminal enterprise when they were charged with a crime. It ignores the cost to the owner's of the property and just adds up the cost to the criminal enterprise because of prosecution.